DATE: Monday, June 16, 1997                 TAG: 9706130005

SECTION: LOCAL                   PAGE: B10  EDITION: FINAL 

TYPE: Opinion 

SOURCE: BY TODD ROBERTS 

                                            LENGTH:   84 lines

VIRGINIA'S LOTTERY COSTS MORE THAN IT EARNS

Speaker of the Virginia House of Delegates, Thomas W. Moss, Jr., believes that ``Deep-sixing the Lottery would be an expensive mistake for Virginians'' (Another View, May 16). I don't think so.

Here's how I interpret the figures he used to make his point.

$489 million won in prizes and presumably spent by the winners would have been spent, somehow, anyway by the folks who originally held the money. Had they not spent the money on lottery tickets, they would have spent it on something else. So if the money would have been spent in Virginia anyway, what is the net gain to our economy? Zero.

$3.2 million collected as state income taxes would have been collected anyway - at least in part, and perhaps totally, through sales taxes, payroll withholding, etc. - had the $80 million in taxable prize money simply continued to circulate in the economy. More significant, though, is that increases in tax revenue take away money from the private sector. Less money in the private sector equates to a corresponding reduction in economic activity. So if Lottery winnings are taxed, and an equal reduction in commerce occurs, what is Virginia's net gain? Zero.

$49.1 million earned by the Lottery's 5,800 retail partners is most instructive. What service did they provide, what product did they trade in return for their earnings? Nothing. Nothing today exists in Virginia to account for the value those dollars presumably represent. Net gain? Less than zero!

In terms of goods that purchasers received, Virginia's economy is actually $49.1 million poorer than it might have been.

$332.6 million generated for the general fund and designated for public education, grades kindergarten-12. There is no difference between this form of revenue and taxes - except who pays. Thus, while public education may benefit, and thereby our commonwealth may be improved, these advantages are purchased, again, at the cost of $332.6 million in general economic activity. Moreover, this $332.6 million loss of activity occurred specifically within that segment of our economy that buys lottery tickets. Net gain? Zero.

$64 million spent to operate the lottery. As with the retailers, this money bought our economy nothing. We'd have been better off to burn the cash. Then, at least, the remainder would be worth more, there being less of it in circulation, chasing the same quantity of goods. But having spent all those millions on the completely and perfectly wasted infrastructure, advertising and human effort that sustain the Lottery, the net gain is: negative $64 million.

$9.2 million collected for Virginia's Literary Fund may as well have been added to the general fund, for all the good it does. Perhaps, though, we can snatch a small lesson on political deceit from this: Politicians may say it's for Mom, they may say it's for apple pie, but when government gets the money, Mom doesn't buy apples. Net gain? Zero.

There are two ways to view these results. In one, you add up the gains and losses:

0 + 0 - 49.1 + 0 - 64 + 0 (EQ) -113.1

In this view, the $924 million in Lottery ticket sales in 1996 caused a loss to the commonwealth of $113.1 million.

The other view - which I take to be more nearly correct - is to recognize that all of the $924 million spent on lottery tickets produced absolutely nothing in Virginia last year. For all the money that changed hands, nothing was made, no object was improved, no intrinsic benefit materialized. Virginia didn't loose just $113.1 million - it lost the entire $924 million.

Except that - my last rebuttal - a substantial human activity was involved in the hand-to-hand exchange of all that cash, its sequestering in government coffers for a time and its eventual release back into to the economy. In productive transactions - where buyer and seller both gain something - the cost of such activity is inherently paid for. But in the nonproductive transactions that Lottery ticket sales truly represent, those activities cannot be paid for. They cannot be paid for, because the transactions themselves involve no goods.

So, whatever dollar figure represents the sum of Lottery-related human activity, that, too, is a clear loss to Virginia's economy, over and above the nearly $1 billion in ticket sales that produced nothing.

Those who support Virginia's Lottery for the funds it gives to government spenders simply ignore the Lottery's real effect on the economy. True, our representatives may spend ill-gotten gains on good works after the fact. They are still good works. But they are purchased at the cost of prior losses greater than the good expense. MEMO: Todd Roberts, a Norfolk resident, is a technical writer in the

computer industry.

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